Valuing a European Option Under the Heston Model with Interest Rate

In this research study, we derive a closed-form pricing formula for European options with analytical solution under the Heston model with the interest rate; in order to follow two-factor model by using the short-term interest rate and the volatility of the short term rate as the two factors. Heston-Longsraff-Schwartz hybrid model is proposed. Therefore, the numerical results in this paper represented different situations of computing European call option prices than can be more close to reality.